Resources Connection Inc (RGP) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Resources Global Professionals third quarter fiscal 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to hand the conference over to Ms. Kate Duchene, Chief Legal Officer. Ma'am, you may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for participating today. Joining me on this call are Don Murray, our Chairman and Chief Executive Officer; Tony Cherbak, President and Chief Operating Officer; and Nate Franke, our Chief Financial Officer. During this call, we will be providing you with comments on our results for the third quarter of fiscal year 2013. By now, you should have a copy of today's press release. If you need a copy and are unable to access via our website, please call Patricia Marquez at 714-430-6314, and she'll be happy to fax a copy to you.

Before introducing Tony, I'd like to read an important announcement about certain statements that we may make during this call. Specifically, we may make forward-looking statements, in other words, statements regarding future events or future financial performance of the Company. We wish to caution you that such statements are just predictions and actual events or results may differ materially. We refer you to our 10-K report for the year ended May 26, 2012, for a discussion of some of the risks, uncertainties and other factors, such as seasonal and economic conditions, that may cause our business results of operations and financial conditions to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call.

I'll now turn the call over to Tony Cherbak, our President and Chief Operating Officer.

Thanks, Kate, and good afternoon and welcome to the Resources Global third quarter conference call. I'm going to begin by giving you a brief overview of our third quarter operating results.

Total revenue for the third quarter of fiscal 2013 was $138 million, a 3.7% decrease over the comparable quarter a year ago and a sequential decrease of 2.3% from our second quarter revenue of $141.2 million. Exchange rates did not have a meaningful impact on the consolidated results for the quarter. The wind down of a large foreclosure review project resulting from our client's settlement with the US government, combined with lower international revenues in the latter portion of the quarter, adversely impacted our third quarter revenues.

Third quarter gross margin was 37.1%, a decrease of 30 basis points from the comparable quarter a year ago. During the third quarter, our SG&A costs were $41.6 million, a quarter-over-quarter decrease of $1.8 million and a sequential decrease of $700,000. As Nate will expand on later, our third quarter SG&A was lower than anticipated, primarily resulting from a legal settlement and lower incentive compensation.

During the third quarter, we generated cash flow from operations and adjusted EBITDA of $13 million and $11.4 million, respectively. Additionally, we returned $8.5 million to shareholders during the third quarter in the form of share repurchases and dividends. Our pre-tax income on a US GAAP basis was $8.1 million. Based upon an effective tax rate of 44.5% during the third quarter, our net income per share was $0.11, versus $0.10 per share in the third quarter of fiscal 2012.

Let's talk about revenue trends for a moment. As we reported in early January, weekly revenues during the first three weeks of the third quarter averaged $11.8 million. As expected, we lost about one week of revenue during the Christmas and New Year holiday weeks. We bounced back quickly from the holidays, with non-holiday weekly revenues averaging $11.9 million through the first week of February. During the winding down of the mortgage servicing review project in early February that I referred to earlier, combined with the decline in international revenues, caused our weekly revenues to fall to an average of $11 million during the last three weeks of the quarter.

On the International front, our Asia-Pacific quarter-over-quarter revenue decreased 16.3%. While the stability of our revenue within our Chinese practice has improved, Japan was negatively impacted by the completion of certain projects we were working on for three key clients in Tokyo and Nagoya. In Europe, quarter-over-quarter revenue decreased 16.1%. While our business in Europe appeared to be improving in the early weeks of the third quarter, our European weekly revenues following the holidays did not bounce back to pre-holiday levels.

Now, a brief comment about how Q4 is progressing. During the first four weeks of our fourth quarter, weekly revenues have averaged $11.2 million, a slight improvement from the $11 million during the last few weeks of the third quarter. Weekly revenues in the latter part of March have been impacted to some degree by Spring Break throughout several regions. Nate will now provide you additional details of our third quarter financial results.

Thanks, Tony. As mentioned, revenues for the quarter were $138 million, a decrease of $5.3 million or 3.7% from $143.3 million in the third quarter of fiscal 2012. On a sequential basis, revenues decreased 2.3%. On a constant currency basis, the quarter-over-quarter decrease was 3.8%, and sequentially, 2.3%. For the third quarter, revenues in the US were $105.9 million, up 1.1% quarter-over-quarter and flat sequentially. For the third quarter, total revenues internationally were $32.1 million, down 16.8% quarter-over-quarter and 9.1% sequentially. International revenue accounted for approximately 23% of total revenues for the quarter, down from 25% in the second quarter.

Europe's third quarter revenue decreased 16.1% quarter-over-quarter and 5.7% sequentially, while the Asia-Pacific region saw third quarter revenues decrease 16.3% quarter-over-quarter and 13.7% sequentially. On a constant currency basis, total International revenue decreased 17.1% quarter-over-quarter and 9.3% sequentially.

On a sequential quarterly basis, the US dollar was weaker against the euro, but stronger against most Asia-Pac currencies. As a result, on a sequential constant currency basis, Europe's revenue decrease would have been 7.9% and Asia-Pacific's revenue decrease would have been 10.5%. On a quarter-over-quarter basis, Europe's revenue decrease would have been 18% and Asia-Pacific's would have decreased 12.2%.

Let me now discuss early revenue trends for the fourth quarter of fiscal 2013. Weekly revenues for the first four weeks of the fourth quarter were $11.5 million, $11.3 million, $11 million, and $11 million. The most recent couple of weeks were slightly impacted by Spring Break vacations in certain regions. In thinking about the remainder of the fourth quarter, the fifth and sixth weeks of this quarter will be impacted by Easter-related holidays in many locations. Historically, we have lost approximately 1.5 days of revenue due to these holidays.

Let me now discuss gross margins. Gross margin for the third quarter was 37.1%, a 30 basis point decrease from 37.4% a year ago and down 200 basis points from 39.1% in the second quarter. While we anticipated 150 basis point decrease in sequential gross margin, we experienced higher healthcare costs in our self-insured plan during the quarter, reducing our margin by an additional 50 basis points. The average billing rate for the quarter was approximately $127, compared to the same amount in the second quarter and $128 a year ago.

The average pay rate for the third quarter was approximately $63.00, the same as in the second quarter and down from $64.00 one year ago. Please remember, these hourly rates are derived from prevailing exchange rates during each given period. Excluding reimbursable expenses, our third quarter gross margin was 37.7%, which compares to 38.2% in the third quarter a year ago. In thinking about gross margin in the fourth quarter of fiscal 2013, and consistent with prior years, we would expect gross margin to improve sequentially by approximately 200 to 220 basis points, primarily due to the absence of compensated holidays in the US. For the third quarter, gross margin in the US was 38.2% and our International gross margin was 33.6%, representing a quarter-over-quarter decrease of 60 basis points in the US and flat internationally.

Related to head count, for the third quarter, the average consultant FTE count was 2,254. This compares to 2,295 in the previous quarter and 2,297 in the year-ago quarter. Quarter-end consultant headcount was 2,254, versus 2,300 a year ago. The total headcount of the Company was 2,953 at quarter end.

Selling, General & Administrative expenses for the third quarter were $41.6 million, or 30.1% of total revenue, a quarter-over-quarter decrease of $1.8 million. SG&A was $42.3 million, or 30% of revenue, in the second quarter of fiscal 2013. While we anticipated a sequential increase in SG&A in the third quarter due to the reset of payroll taxes, our SG&A during the quarter benefited from a $550,000 favorable legal settlement and a reduction of approximately $450,000 in incentive compensation accruals, as well as other SG&A items. We believe SG&A expenses in the fourth quarter of fiscal 2013 will increase approximately $1.6 million from the third quarter level. We plan on higher marketing expenses in the fourth quarter and we will not benefit from the legal settlement and lower incentive compensation.

Stock compensation expense, which is included in the SG&A amounts I just disclosed, was consistent with the second quarter at $1.8 million, or 1.3% of total revenue, down from $2 million, or 1.4% of total revenue, in the third quarter of fiscal 2012. We would anticipate quarterly stock compensation expense in the upcoming quarter to decline by approximately $200,000 from the third quarter's level. At the end of the third quarter, our office count was 75, 49 domestic and 26 international. During the quarter, we consolidated two suburban offices upon lease termination.

Related to other components of our financial statements, depreciation and amortization was $1.5 million for the quarter, compared to $1.6 million last quarter. We would expect depreciation and amortization expense for the upcoming quarter to approximate $1.6 million.

Our adjusted EBITDA, or cash flow margin, which we define as EBITDA before stock compensation and contingent consideration adjustments, was 8.3% in the third quarter, versus 8.6% in the third quarter of fiscal 2012 and 10.4% last quarter. During the third quarter, on a GAAP basis, we recorded a provision for income taxes of $3.6 million on GAAP pre-tax income of $8.1 million, representing an effective tax rate of approximately 44.5%. Our effective tax rate is impacted by our current inability to offset income in certain tax jurisdictions in which we are profitable with losses in tax jurisdictions in which we are not profitable.

Our cash tax rate continues to approximate 42%. Our GAAP tax rate for each of the upcoming quarters is difficult to predict and could be volatile, as the rate will be dependent on several factors, including the operating results of our US and foreign locations, each of which are taxed or benefited at different statutory rates and the offset of the tax benefit of foreign losses in certain locations by valuation allowances. In summary, our per share income was $0.11 for the quarter on a non-GAAP basis; but consistent with some analyst models which utilize the cash tax rate of 42%, our per share income would have been $0.12 per share.

I'll now turn to our balance sheet. Cash and investments at the end of the third quarter were $118.9 million, a $5 million increase from the end of the second quarter. The increase stems primarily from cash generated from operations of $13 million and $1.9 million in proceeds from employee stock purchases, offset in part by share repurchases and dividends totaling approximately $8.5 million during the quarter. Capital expenditures were $1.5 million during the quarter.

During the third quarter, we repurchased approximately 509,000 shares of our common stock at an aggregate cost of $6 million, or $11.89 per share. On a fiscal year-to-date basis, we have repurchased approximately 1.8 million shares at an aggregate cost of $21.9 million, or $12.07 per share. The shares repurchased represent 4.3% of our outstanding shares as of the beginning of the fiscal year.

Our current Board authorization for our stock buyback program has approximately $84.8 million remaining. We will continue to return cash to shareholders through our regular quarterly dividend and share repurchases, while maintaining a balance between the capital requirements of growing our business and fiscal prudence. Our shares outstanding at the end of the third quarter were approximately 40.8 million.

Receivables at quarter end were approximately $90.2 million, compared to $93.5 million at the end of the second quarter. Days of revenue outstanding were approximately 59 days, compared to 56 days in the prior year's comparable quarter and 58 days in the second quarter.

Now, I'd like to turn the call over to Don for some closing thoughts.

Thanks, Nate. We continue to make progress in several areas, despite the softness in international markets and the premature wind down of the large mortgage review project. Related to Dodd-Frank, we continue to see several of our financial institution clients dedicate more resources to their compliance and [remediation] efforts, and we have won new projects related to [improved] regulations. And as we anticipated, now that the annual report filing season has wound down, we have started some complex mineral compliance engagements, with [numerous] proposals are outstanding.

While we believe there will be growing demand for assistance, some companies are moving cautiously, waiting for the outcome of the US Chamber of Commerce's lawsuit, which seeks to modify or scrap the rule. While our clients continue to utilize our services, they continue to focus on a very discrete number of initiatives with their highest ROI in their formal budgets. We continue to win engagements with new and existing clients, and see a continued pipeline in these projects. These new wins just don't offset all the client initiatives being completed and the decline in revenues internationally.

In addition to Dodd Frank-related projects, recent engagements include business process optimization projects, business intelligence software implementation, and regulatory compliance projects, just to name some. Our client retention will be invaluable as the demand environment improves.

The following statistics demonstrate our focus is on outstanding client service. Client continuity is outstanding. Through the third quarter, we served all of our top 50 clients from fiscal 2012. In fiscal 2012, we had 218 clients for whom we provided services exceeding $500,000 in fees, and through the third quarter of fiscal 2013, on a run rate basis, we have served 214 clients at this level, similar to last year's level. Our top 50 clients represented 40.2% of total revenues, while 50% of our revenues came from 83 clients. Our loyal client following is reflective of our client service approach and the quality of the work performed by our consultants.

Our largest client for the quarter was approximately 4.5% of revenues. And through the third quarter, 94.1% of our top 50 clients have used more than one service line. 76% of those top 50 clients have used three or more service lines. This service line penetration reflects the diversity of relationships we have within our clients' organizations.

So this concludes our prepared remarks. We'd be happy to answer your questions at this time.

Thank you.

(Operator Instructions)

Kevin McVeigh, Macquarie.

Hi, Kevin.

Your line is open.

(Operator Instructions)

I apologize for that, guys. This is actually Derek Sbrogna in for Kevin. How are you guys?

Good.

So I was just wondering, you obviously talked about some of the challenges in Asia, specifically in Japan, where some projects are coming to end-of-life. Can you maybe talk about if you're seeing any kind of pipeline build there, or whether things have really just kind of slowed down?

Yes. In Japan specifically, we're not really too worried about that, because we've got a great team there. Just this week, they added 10 consultants on a variety of projects. So this, I think, is just really a timing issue, just relative to the roll off of a couple of these projects, not unlike what we're facing in the rest of the Company. But I think Japan and China will both be just fine.

Okay. Great. And just one more, if I can. Obviously, there's a lot of talk about healthcare reform, and I was wondering if you can address whether you've seen a pickup in the healthcare business, and specifically whether the healthcare solutions group has started to gain any traction?

What I would say is we're seeing, on the consulting end, some new projects around compliance with Medicare/Medicaid rules. We are also in the beginning stages of demo'ing the new Pavisse software tool. And I would expect, as we move throughout the remainder of the calendar year, that we'll see implementations of that tool. So I think we're pleased with the progress overall. Our healthcare business sequentially grew about 8%. So that is an area of growth for us.

Got it. And I would imagine you would expect that can probably accelerate from that 8% over the next year or so?

We'd certainly hope so.

Right. Okay. Great. That's very helpful. Thanks, guys.

You bet.

Paul Ginocchio, Deutsche Bank.

Just on the incentive compensation question, did you -- sounds like you lowered your incentive compensation. Is that because you've decided you're not going to hit your targets for this year, and is that what's flowing through into the lower stock comp for next quarter? Am I reading that right? Or is something else going on?

Paul, it's Nate. What I would tell you is the incentive stock comp is not related to the stock compensation. The offices -- we accrue the incentive comp based on meeting certain financial metrics. So it was basically, there's a handful of offices that during the third quarter, we deemed it was unlikely by the end of the year they'd make those metrics, so we reversed the amount that had been recorded in the first couple of quarters.

Thanks. And then just on the healthcare hit, it was basically 50 basis points to gross margin for the higher costs?

Yes. That's about right. It was based on where we had anticipated last quarter gross margin. Pretty much everything came in where we expected, except for the costs associated with the self-insured plan.

Okay. And so the legal settlement basically is just a little bit less than the hit from the healthcare, so it kind of washes out?

Yes.

Okay. Thanks very much.

Sara Gubins, Bank of America Merrill Lynch.

Hello. This is David Ridley-Lane filling in for Sara. Just in terms of magnitude, how large was the mortgage servicing project?

What I would tell you, David, is that during those last -- the last three weeks of the third quarter, it probably impacted us approximately $300,000 per week.

Okay. And was this your largest single project? Or is this -- I'm just trying to gauge how big this project was, relative to your portfolio of projects.

At the time, it was our largest single project. Large projects like this are a blessing. And then when they end prematurely, they're a curse, because it takes a lot longer to get that number of consultants back out again. So we don't mind having those projects. It's just, we usually are able to plan the reversal of the project as it's winding down. This one just happened to wind down quickly, because of a court settlement.

Got it. Okay. And then, will you see any benefit in terms of lower cost from the two office closures? Or is that mostly included in the SG&A run rate in the quarter?

David, that's going to be included. These were just relatively small suburban offices, so it's a relatively immaterial impact on occupancy costs. But over time, all those amounts -- they are factored into we gave you.

Got it. And then I think you've said previously, your IT practice, that's the fastest growing service line for you. Can you just, maybe in terms of growth rates, is this high single digit growth rate? Is it faster than that?

It actually, during the third quarter, it grew 18%. So it's going very well, David, and we continue to invest in selected resources to add to that practice.

Got it. Thank you very much.

Gary Bisbee, Barclays Capital.

Hi, guys. Good afternoon. Just a quick one, follow-up on the healthcare cost. Was there anything in particular going on there, or is that just more of -- feel more one-time-ish, as opposed to that being a new trend line we should think about?

I would tell you, it's always hard to tell. We had seen really good improvement over the last several quarters. We did have a couple of what I would call very large claims come through during the quarter that reached the stop loss levels embedded in the plan. So we're hoping that a chunk of it is one time, but it's something that we watch very closely.

Are you expecting much change in health from what you know now about what the Affordable Care Act will do across your business?

We'll obviously evaluate our existing plan that our consultants and everyone benefits from. At the present time, I don't know that we'd see, in the next year, significant changes in the benefits, but it's clearly something that we're looking at. Clearly, it's not the impact to us that it is to others that do not provide healthcare or provide what are typically referred to as the mini-med plans.

Okay. And just from a high level, what kind of things would it take or is it going to take to get the US business growing at a healthier clip, let's say mid-single digits or better? Is it really just a decrease in uncertainty, allowing companies to start spending again? Is it macroeconomic growth picking up? Or could in the current environment, the way things are, could things like more Dodd-Frank coming through and stuff like that really have a big enough impact?

It's probably a combination of all of those. But we're not waiting around for things to come to us. The -- Nate mentioned in his prepared remarks about the [conflict] minerals going very well. We've actually won a few engagements there, and we've got several more proposals that are outstanding. We're winning there, over the big four.

We're spending a lot of time looking at select acquisitions, acquisition candidates that fit our criteria of being a cultural fit, having a reasonable economic structure, and being something that's complementary to our existing service lines or giving us a geographic presence -- critical mass in certain geographies. Just recently, in a couple of these instances, we've issued letters expressing our interest in going to the next stage of negotiations. So we're taking a hard look at a lot of different companies, but we will be very selective just to make sure that our shareholders benefit from a good acquisition.

And that's actually a good segue into my next question, which is maybe you can expand a little bit on -- you just said geography, but on the types of service offerings you'd look at. It's interesting to hear you talk about a software offering within healthcare. And I know you've talked about building that, after you hired those folks. But it seems a little different from how we thought about the business in the past being largely a project-based type business. What's the mix today, maybe in that core project base, temp-type business versus full-time people and/or other revenue streams? I guess I'm just trying to get a sense how you're thinking about that from a high level today. Thank you.

Most of our business -- almost all of our business is project-based, where we're competing against the big four consulting firms, or an Accenture or a local type of firm. So we are a project-based firm. The healthcare solution that we're marketing and developing is really going to sell consulting services to implement it and, in some cases, maintain it for the clients. So that's also project-based.

When we talk about acquisitions, as Tony has, we're looking for something that complements what we do. And it may not be exactly what we do, it may be something that's got a great niche reputation for clients that we serve, but we don't serve in that same manner. Or it may be, like Tony said, getting us more critical mass in a geography we don't have. But we're being pretty aggressive and going out and looking for opportunities to kick-start the business, both in Europe and the United States. On the other hand, we're also looking to increase our image awareness. Tony, do you want to mention --.

I was going to say that we have, as part of the increased branding expenses, or marketing expenses, that Nate referred to in his prepared remarks, we're rolling out a set of television commercials -- we've actually produced two of them -- that will run in the fourth quarter, under our new brand name, RGP, which is obviously the initials for Resources Global Professionals. But our people are really excited about the RGP, and we think that the television commercials will really drive home the reinforcement of that new brand.

And I think I heard a radio commercial on Bloomberg Radio in New York, maybe, with that new brand image in the last month or so. It feels to me like you've changed the name a couple of times, and maybe that's just because I remember Resources Connection being the legal corporate name. But the business -- the name under which you sell it is different. But what's the rationale for the change? And hadn't you spent quite a bit of money under Resources Global Professionals? I guess I'm trying to understand what --.

Resource Global Professionals is our business AKA that we are doing business under. RGP is something to identify Resources Global Professionals in the same way as a PriceWaterhouseCoopers uses PWC, or General Electric uses GE. So we're not changing our name to RGP. We're basically using this as our label for RGP.

And we've, in essence, shifted a lot our marketing spend from print ads, which are very expensive and we didn't think that we were getting the bang for the buck out of those, more to the radio -- and this is the first time that we are testing out television, so we'll see how it works. But it actually -- it's probably less expensive than you would think to do this series of television commercials that we have planned over the next four quarters.

Okay. Thanks for all the color.

You bet.

Molly McGarrett, JPMorgan.

Hi there. I was wondering if you could just talk about Europe on a regional basis, what you're seeing country by country, any change in trends from second fiscal quarter? Thanks.

Molly, you've seen -- you obviously read the same things that we do in the newspaper. The Euro zone is still a very difficult place to do business, with all of the financial crises that they have with the banks. We've seen good growth this quarter in Germany and Switzerland. Outside of that, not so much. So it's a very, very difficult business environment. Now, I would say that if there's good news in all of this, we have recently taken a really hard look at Europe's cost structure and we've made some adjustments, so that even though the growth has not been there, when we look at the majority of the offices, they have positive profit contributions. So that's where we are on Europe.

If you look at Europe, you have -- in France, you have Hollande talking about job growth as his number one priority, but everything they're doing is inhibiting job growth. So it's not dissimilar to the rest of the world that is in the (inaudible) economy, plus they have all these countries they have to bail out, so our clients are very cautious in Europe.

Another bright spot in Europe for us has been Sweden. Our Swedish practice is very entrepreneurial in finding what Tony calls go to where the clients are spending money, find the spend and serve them in that area. So Sweden, even though it's not a large economy, our Swedish office does a great job in enrolling the practice. And trying to take their best practices and spread them throughout Europe is another one of our priorities.

Got it. And then on pricing, looks like bill pay rates haven't changed too much. But on a regional or an end markets basis, have you seen any changes there in terms of the tone of the discussions?

No. Our sense is, as we've said the last couple of quarters, the pricing has been very stable. As you mentioned, you see that in the average bill rate. So you have a predatory pricing that we've talked about several quarters ago, we really don't feel in the marketplace. It really seems to be the overall cautious demand environment.

Got it. Thanks very much.

Mark Marcon, RW Baird.

On the pricing side, what would you say the discount is relative to the big four for a comparable type of consultant, at this point?

Mark, I think it's probably similar to what we've said in the past, that we hear anecdotally that on average we're probably about 30% lower. The issue is always the 100-year brand. And that's one of the reasons why we continue to invest in the brand.

When you look at our services compared to the big four, the level of consultant is really not comparable, because in our case, they're going to get somebody in, let's say, the United States, with 20 years of experience, typically directly related to whatever the project that they want us to work on. And the big four, they're going to get a pyramid type of service, where the majority of the people are going to be less experienced, two, three years of experience, and they're not going to have the same level of talent along the project. What we've seen is, in order to sometimes bring their rates down, they even offshore some of the consulting to their Indian affiliates. And those people aren't even on scene with the client. So while our rates are a differentiation, we think a bigger differentiation is the level of experience in our consultants.

And how is the bench time being managed in terms of, obviously, you're not paying them when they're not on assignments. But are there any sort of metrics that you can share with us, just in terms of the utilization of the consultants when they're coming --

We're 100% utilized, Mark, because we don't have any downtime, just for the reason that you mentioned. We pay the consultants based upon the time that they're working. And so they either are working and getting paid, or they're not getting paid.

I recognize that. I meant when they are coming off of an assignment, like what percentage of the consultants can get reassigned within a reasonable amount of time?

We shoot for a consultant, A-plus consultants, to become busy as soon as possible, within a week or sometimes with no break in service. Consultants that have more, I would say, unique skills that aren't as re-sellable, they're going to look for other projects with other consulting firms at the same time, because they may not be as repeatable type of projects for us. The unique thing about our business model is we don't have to re-engineer our consulting base as the types of projects change. Our consulting base constantly evolves to where the demand is. So our biggest job is managing the A-plus consultants. And for the most part, they're busy all the time.

Got it. So there's no change in terms of the amount of time between assignments for those A-plus'ers?

I don't think there is.

Okay.

It's the really strong people who have a more unique skill set that we really work hard to keep busy, because they're harder to sell that unique skill set.

And then with regards to the court decision impacting the mortgage servicing, is there -- are there any other ramifications or any other big projects that could potentially be impacted by that decision? Or was that unique to that one client?

That was unique to that one client.

Okay.

Probably unique to lots (inaudible), using different providers to try to get the same results. So that kind of screeched to a halt.

And then with regards to IT where you're seeing the good growth, what percentage of your revenue is that up to? I know that there's not a clear differentiation between IT and --

It's about 20% of our revenue, Mark.

Okay. Great. Thank you.

Aaron (inaudible), Credit Suisse.

Thank you for taking my question. I'm calling on behalf of Kelly Flynn. My first question is, if you could just comment on the number of days of revenue in Q4 versus Q4 '12?

So there are no holidays. So the total number of days are 65. But then as I had mentioned in the prepared remarks, we will most likely lose about a day and a half due to the Easter-related holidays throughout the world.

Okay. And my second question is regarding your recent launch of the business performance management service. Could you talk a little bit about the market opportunity that's offered there and how you thought about the service launch timing? Is this something that you think has a heady demand already, or is this something you think you can entice clients with over time?

I think, as Don and Tony often talk about, we tend to evolve our capabilities to where we see clients needing help and requesting assistance. So in the area of -- on an overall term, business intelligence, we're seeing a lot of companies trying to improve their decision-making -- and by using the data that we have. So we're really just formalizing services that we've been serving clients with and formalizing the strategy to go to other clients, as well. So it's really just following what we've somewhat been doing.

Okay. All right. That's helpful. That's all from my end. Thank you.

Paul Ginocchio, Deutsche Bank.

Tony -- or sorry, Nate -- you've historically given us, or disclosed, Dutch revenues in your 10-Q. Can you give that to us? For the quarter?

Hang on. One second.

Sure. In that 65 days in the May quarter, that's flat year-on-year? Is that correct?

Yes.

And it was -- were you down a day or two days, year-on-year, in the February quarter? Sorry if I missed that.

I'm sorry, I misunderstood your -- can you repeat the question?

In the Feb quarter, you lost a day or two days, year-on-year? What was it? Was it 62 days, or --

The number of paid holidays were the same. But because Christmas and New Year's fell midweek, the impact of the vacations was a little greater, so we lost about a week in the quarter. And then you also asked -- the Netherlands revenues were $6.2 million for the three months.

Great. Thanks very much.

You bet.

(Operator Instructions)

Mark Marcon, RW Baird.

You have some content mineral projects that are coming on. Can you give us a sense for what sort of size those are?

Initially, Mark, they're basically what we call a high-level diagnostic. So the initial revenues will be, I think, much lower than what -- if we get the next phase to go to the supply chain due diligence phase of the project, the initial revenues are low. But if we get all of that work, it will be pretty substantial. So just to give you a look at where our proposals are, out of all those proposals, it's for approximately $3 million in fees. So we'll see what hits and what doesn't, and then where it ultimately goes from there. But we've been winning some of those things over the big four, especially this last week, we won two very large clients over the big four.

And are those projects going to commence, or would there be a hold up until the US Chamber of Commerce --.

Mark, in this case, these are companies that are -- what I think Tony was saying is companies that are moving forward with it. But they're doing it in what I would call stages. And so one of the things, as this lawsuit hit, we are going to market with what we call an initial diagnostic, which is to really go in and understand -- try to quantify the level of effort, the number of products they have that use these minerals, and then develop a project plan. So you're seeing a number of companies wanting to get started in that realm. You're not seeing a lot of clients sign up for what I would call soup-to-nuts, just because of the uncertainty. But there's a good volume of companies that are kind of doing what we look at as Phase I approach.

It's the initial assessment and planning. That's what we're doing right now, on how to get the project done.

Understood. And then with regards to the US, are you seeing any sort of regional differences between your biggest East and West Coast markets relative to some of the second-tier markets, in terms of overall demand levels or trends?

The West has come on quite strong, Mark. The central has fallen off a little bit, just based upon that one -- basically, the mortgage project that wound down. So we are very encouraged with our West region. And in the East Coast, even though they declined by about 6% in the quarter, they were up 4% sequentially. So we're seeing a little bit of momentum in Tri-state, especially in New York City.

And then, what was the CapEx for this quarter? And how are you thinking about that on a go-forward basis?

Mark, the CapEx for the quarter was $1 million. Kate had pointed out that I might have misread that, but it was $1 million for the quarter. And we would anticipate about $1.3 million in CapEx for Q4. We're building out a new office.

Okay. And do you think that's a good run rate for next year as well, roughly speaking?

We're just finalizing some of the CapEx plan. I would probably say next year for the year, it would be between $3 million and $3.5 million.

And then for a base for tax rates, obviously there's lots of variants depending on where the profits come in, but what should we use for the base rate for the remainder of the year and for next year?

On a GAAP basis, my guess is that it will come in probably just shy of 50%, based on the current run rates, primarily in Europe.

Okay. Great. Thank you very much.

You bet, Mark.

Thank you. I would now like to hand the conference back over to Mr. Don Murray for any closing remarks.

I just wanted to thank our investors, and thank you for your continued support and interest in Resources, and we look forward to our next update for the year-end of fiscal 2013.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect, and have a wonderful day.